Change of Sentiment; Something Bad In Tech-land

As of a week ago, the leading index was the NASDAQ, up more than 11 percent on the year, as opposed to the Dow Industrials, which had been lagging. Prior to this week, the Dow was up less than four percent and it was down for the year much of the time between February and early July.

Something snapped in the minds of investors this week. Maybe it was the high valuations on some of the more speculative stocks sporting the NASDAQ. Perhaps, in the search for yield, investors sought the safety of dividend producers on the Dow. Whatever the case, the Dow, this past week, was up 1.41%, while the NASDAQ shed 0.29%. It was a radical shift that appeared, magically, Wednesday morning, when the Dow was trading below 24,000.

In a matter of less than three trading session, the Dow tacked on a whopping 687 points, much of it at the open on Thursday, when the Dow popped higher and stayed well into the green the rest of the day.

Skeptics of the market will point to the radical rise on Wednesday and Thursday as proof of manipulation, or even - everybody's favorite word this season - collusion, by central banks and their ancillary brokers, to boost the share prices of the staid and steady heavy industrials. Such speculation cannot be bought off easily in this environment. It's apparent to just about everybody that the Federal Reserve and their counterparts in Japan, China, and the European Union will not stomach a severe downturn, at least not at this time. The bull market is just a few trading days from becoming the longest in American history, something the head honchos at the Fed wish to pin on their beanies before they ride triumphantly into some economic sunset.

The shifting sentiment was stunning, however. As the Dow soared, the NASDAQ soured. Many of the grand tech bonanza stocks like Netflix (NFLX) and Telsa (TSLA) were down hard for the week. Netflix dropped nearly 10%, from 345 per share to 316 at the close of business Friday. From its peak just a month ago (July 11), Netflix is down more than 100 points.

Tesla is another story altogether. The darling little electric engine that could is rapidly approaching bear territory, down to 305 at the close Friday from 379 on August 7, a span of just nine trading sessions.

Facebook, everybody's favorite ranting and raving lunatic asylum, is already in bear territory, dropping from a high of 217.50 on July 25, to a close of 173.80 Friday afternoon. That's precisely a 20.1% decline. Be sure to post to your friends, family, and anybody who gives a hoot, rat's behind, or beaver dam.

None dare call is collusion, so maybe collision is the correct word for what happened on Wall Street this week. It was nothing short of a collision of rational thinking and emotional yield-chasing.

Next week may be more or less intriguing, but after Labor Day, this market is going to become very interesting indeed.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20
8/17/18	25,669.32	+110.59	+261.79

At the Close, Friday, August 17, 2018:
Dow Jones Industrial Average: 25,669.32, +110.59 (+0.43%)
NASDAQ: 7,816.33, +9.81 (+0.13%)
S&P 500: 2,850.13, +9.44 (+0.33%)
NYSE Composite: 12,908.26, +66.98 (+0.52%)

For the Week:
Dow: +356.18 (+1.41%)
NASDAQ: -22.78 (-0.29%)
S&P 500: +16.85 (+0.59%)
NYSE Composite: +64.77 (+0.50%)

Dow Surges Nearly 400 Points Even As Turkey Crisis Deepens

Apparently, those mystery buyers who emerged Wednesday after the Dow was down 360 points were not quite finished with their stock buying spree. On Thursday, blue chips were all the rage, with the Dow soaring nearly 400 points on the day, it's best one-day performance since a 428-point advance on April 10.

So, that's more than 750 points in less than two days. The message is clear: buy stocks. Buy stocks with dividends. Disregard the price you are paying.

Obviously, something is afoot, though it seems that these recent buys are wrong-footed, at the least.

Friday will open lower, though there's no telling where stocks will go after that. Turkey's currency crisis is not going to improve in a day or two, or even in a few weeks or months. The economy of the crossroads nation is going to be a basket case for years. The same is true of Argentina, which is suffering through another crisis, something that occurs on a regular basis in South America. Venezuela's economy is dead, Brazil is devolving into widespread chaos, and the rest of the so-called EM (Emerging Market) economies are being clubbed to death by a strong US dollar.

Now, perhaps the rest of the world suffering is good for the advanced nations such as the US and in Europe, but that should be viewed as a short-sighted point of view in the long run.

Eventually, between their currencies deteriorating and President Trump piling on tariffs and sanctions, most of the world's emerging market nations will not be very emergent at all. Rather, their economies will suffer, their populations will grow increasingly restive, and trade with them will decline.

The silver lining for the United States is that such conditions should drive more domestic innovation and jobs. Eventually, the smaller nations will adjust to the new normal and maybe the US will muddle through. However, this is not the kind of environment that necessitates massive investment in well-entrenched industries.

Or, maybe it is. Maybe these dip-buying professional traders really do know it all.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20

At the Close, Thursday, August 16, 2017:
Dow Jones Industrial Average: 25,558.73, +396.32 (+1.58%)
NASDAQ: 7,806.52, +32.41 (+0.42%)
S&P 500: 2,840.69, +22.32 (+0.79%)
NYSE Composite: 12,841.28, +118.19 (+0.93%)

Stocks Down Sharply Before Mystery Buyers Catch Falling Knife

The Dow was down 335 point early in the day, but some investors who apparently know more than anybody else stepped in and cut those losses by nearly 200 points by the close of trading.

Let that sink in for a moment.

Who are these savvy speculators? Why did they choose to buy this particular dip at this moment in time. Surely there have been better buying opportunities in the recent past.

Central banks run the markets and can ruin the markets at their own whim.

Keep that in mind always, but especially on days when losses are trimmed inter-day.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12

At the Close, Wednesday, August 15, 2018:
Dow Jones Industrial Average: 25,162.41, -137.51 (-0.54%)
NASDAQ: 7,774.12, -96.78 (-1.23%)
S&P 500: 2,818.37, -21.59 (-0.76%)
NYSE Composite: 12,723.09, -112.22 (-0.87%)

Stocks Post Gains As Turkey Currency Crisis Moves Off Front Page

Stocks rebounded sharply on Tuesday, ending a series of lower closes which saw the Dow drop four straight sessions.

Gains were made in response to the Turkey story moving off page one and onto the list of disturbing problems in the global economy. For what it's worth, thanks to the widespread use of computer algorithms, 21st century stock markets have become more a kind of knee-jerk referendum on current financial and political news, as opposed to the 20th century model with discounted future earnings.

Thus, measurements such as p/e ratios are shunned in favor of more momentum-style observations and manipulations and old models for valuations are routinely disregarded as old hat. In conjunction with the dominant 24-hour news cycle, trading in robust markets such as are available in the US and other developed countries has become a day-to-day operation for many of the greater brokerages.

No longer content with 10-20% annual returns, the proliferation of options, futures, ETFs and other market-distorting, derivative opportunities offer potential for hedging, pair trades, and a myriad of other exotic strategies, schemes, and systems.

Thus, when a currency fails, such as happened in Venezuela and is currently underway in Turkey, markets are prone to react with immediacy before returning to the status quo.

That's the story with today's gains, though the larger issue remains unresolved. The markets have had their say and now move on to the next big thing. This manner of shoulder-shrugging complacency is what makes markets more and more fragile, as, with each big event that has an initial response but no resolution, the underlying morass of problematic financial issues piles higher and higher.

Since the financial crisis of 2008-09, markets have increasingly operated inside a vacuum, fitted with appropriate blinders to geo-political changes and financial disruptions. It's assumed that central banks, which now control almost all of global finance, can handle any issues that may pop up, either with massive buying, interest rate adjusting, or soothing words from the top-most chiefs.

It's an odd way to make a buck, but that's the norm, for now.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61

At the Close, Tuesday, August 14, 2018:
Dow Jones Industrial Average: 25,299.92, +112.22 (+0.45%)
NASDAQ: 7,870.89, +51.19 (+0.65%)
S&P 500: 2,839.96, +18.03 (+0.64%)
NYSE Composite: 12,835.31, +71.65 (+0.56%)

Stocks Extend Losses on Stormy Monday

As severe thunderstorms raged across parts of the Northeast causing flooding, Wall Street had a storm of its own brewing as stocks stumbled, the Dow losing ground for the fourth consecutive day.

What has caused most of the recent turmoil in stocks emanates from half a world away from the US financial center, as Turkey's lira has crashed, panicking banks with investments in the nation of 80 million, disrupting markets globally.

The Dow Industrials' four-day losing streak has ripped 440 points off the index, turning an August gain of 221 points into a 219-point loss for the month.

While the move has not been large by percentage terms, Turkey's problems are far from being resolved. In addition to the currency failure, Turkey's stock market (^XU100) has also fallen sharply (down more than 25% since late January) and US tariffs imposed by President Trump are exacerbating the unruly conditions.

Treasury yields have bounced around, with the 10-year note hitting three percent on August 1, but has backed down 12 basis points, quoted at 2.88% Monday. The 30-year bond peaked at 3.13% on the first of August and has since fallen to 3.05%, leaving the spread between 10s and 30s at 17 basis points, a widening of four bips since August 1.

With the two-year note yield dropping from 2.67 to 2.61 in the month, the yield curve seems to be better behaved than in the early months of 2018. The spread on 2s-30s has remained somewhat steady. The latest quote showed a 44 basis point spread.

The remainder of the week may prove costly to bullish speculation. July was a banner month for stocks, the best since January, but the euphoria has faded.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83

At the Close, Monday, August 13, 2018:
Dow Jones Industrial Average: 25,187.70, -125.44 (-0.50%)
NASDAQ: 7,819.71, -19.40 (-0.25%)
S&P 500: 2,821.93, -11.35 (-0.40%)
NYSE Composite: 12,763.66, -79.83 (-0.62%)